Veteran London Times journalist William Rees-Mogg predicts that the collapse of U.S. mortgage giants Fannie Mae and Freddie Mac could herald a downturn into a 1930’s style depression that threatens to sweep away democratic governments.

Rees-Mogg served as editor of The Times, Britain’s oldest surviving newspaper, from 1967 to 1981, and currently sits in the House of Lords.

In his column today, Rees-Mogg states that the world economy is not just entering an economic recession, but a depression comparable with the great crash of 1929 and its 10-year aftermath.

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Tracing the origins of the crisis back to the dot-com bust at the end of the 1990’s, Rees-Mogg writes that stock markets are so ravaged that they will not recover to their 2007 levels until at least 2032.

A d v e r t i s e m e n t

“This recession has produced a succession of nasty surprises. Things are always proving to be worse than anyone had expected. Last week the crisis spread to the American mortgage giants Fannie Mae and Freddie Mac, created by President Roosevelt in 1938,” writes Rees-Mogg.

“These are far bigger than the investment bank Bear Stearns and Northern Rock put together. They have brought the crisis from the level of billions of dollars, to the level of trillions. No doubt they will be saved because the US would be bust if they went down. But you cannot save six- trillion-dollar institutions without suffering on a large scale.”

The veteran journalist is referring to the 1930’s hyper-inflation crisis in Germany, which led to the destruction of the Weimar Republic and the rise of Adolf Hitler.

“Before we get back to balance, we may see dramatic changes in politics, as well as in business and finance,” Rees-Mogg concludes.

The veteran journalist’s warning comes on the back of news that “U.S. regulators are bracing for dozens of American banks to fail over the next year.”

According to an International Herald Tribune report, “Troubles are growing so rapidly at some small and midsize banks that as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months.”